Tag Archives: insurance

Itaú to buy Citibank Brazil for US$ 220 million 

Itaú has agreed to pay R$ 710 million (approximately US$ 220 million) for the retail operations of Citibank in Brazil. The transaction was announced this morning. Citi primarily serves high-income customers and has 315,000 account holders in the country.
In the acquisition, Itaú acquired loan portfolio, credit cards, deposits, asset management, insurance brokerage and the 71 branches that Citi has today in the main regions of the country. That is R$ 35 billion in deposits and assets under management, 1.1 million credit cards issued and a credit portfolio of R$ 6 billion reais. After the acquisition, Itaú Unibanco will have R$ 1.404 trillion in assets.

The acquisition still needs to receive the approval of the Central Bank and CADE (Administrative Council for Economic Defense)

Citibank joins HSBC in retreating from Brazil. HSBC announced at the end of 2015 that it sold its Brazilian operations to Bradesco. In a deal already approved by anti-trust authorities,  Bradesco acquired HSBC and brought their assets closer to Itaú, largest private-controlled bank in Brazil, by that metric. HSBC was a lot bigger than Citi in Brazil, but today’s acquisition shows Itaú is not willing to let this largest label go.

Itaú has a 5-star rating from Easy Brazil Investing and continues to be a great way to play the Brazilian economic recovery.

Itaú Unibanco: Largest Private-Controlled Bank in Latin America

Itaú is the second largest bank in Brazil. Only behind Banco do Brasil, which is a government-controlled bank, even though part of its equity is traded at Bovespa. We do not recommend exposure to government-controlled companies in Brazil so Itaú is the largest bank we cover in LATAM.

Itau

Itaú Unibanco was formed as the merge of two of Brazil’s largest banks: Itaú and Unibanco. When they merged, they were the 2nd and 3rd private-controlled banks respectively, created a huge institution and left Bradesco in second place.

There is a joke in Brazil that goes: “The three best businesses for you to have in Brazil are: 1st a well-managed bank, 2nd a bank and 3rd a badly-managed bank ”.

Ok. The joke may be an exaggeration. But the banking industry does have a lot going for it in Brazil. Unlike in most developed countries, where small banks and credit unions are always present and relatively strong, in Brazil, the bank industry has a well-established oligopoly, where the 4 major banks have together around 70% of the market share. This oligopoly along with the high switching-cost in the banking industry gives them a good pricing advantage.

The bank industry in Brazil is also conservatively regulated and highly lucrative, with spreads north of 10%. These two factors reduce considerably the risk for small investors in these banks.

Itaú Unibanco has over R$1.4 Trillion in assets (Approximately US$ 500 Billion). It provides retail banking, investment banking, real estate financing, leasing, consumer credit card, foreign exchange and foreign trade financing services.

Itau Unibanco Holding

ADR Ticker ITUB
Website https://www.itau.com.br/investor-relations
Industry* Banking, Insurance, Card Processing
Bovespa Ticker ITUB3, ITUB4
EBI Rating 5-star

Investing in Bradesco: building on its presence

Bradesco is the third-largest bank in Brazil. Unlike in most developed countries where small banks and credit unions are always present, in Brazil, the bank industry has a well-established oligopoly, where the 4 major banks have around 70% of the market share together. This oligopoly along with the high switching-cost in the bank industry gives these 4 banks a good pricing advantage.

The bank industry in Brazil is also conservatively regulated and highly lucrative, with spreads north of 10%. These two factors reduce considerably the risk for small investors in these banks.

Bradesco has over $800 Billion in assets. Its main two segments are banking and insurance, with each contributing almost equally to the company’s bottom-line.

With 4600 branches throughout the country, Bradesco is the only of the major banks to be present in every city in Brazil. This strong presence will allow Bradesco to take advantage of Brazil’sgrowth over the next decades.

Easy Brazil Investing Rating

Bradesco’s competitive advantage is built on its presence, brand, scale, high switching-cost and the oligopoly in the industry. These factors along with the exposure to a fast-growing market, grant Bradesco the highest EBI Rating: 5 stars.

Banco Bradesco S.A.

ADR Ticker BBD
Bovespa Ticker BBDC3, BBDC4
Latibex Ticker XBBDC
Website http://www.bradescori.com.br/site/conteudo/home/default.aspx?idiomaId=2
Industry* Banks, Insurance
EBI Rating 5-star

Santander Brasil: Decent Investment with potential mid-term upside

Santander is the fourth-largest bank in Brazil. Unlike in most developed countries where small banks and credit unions are always present, in Brazil, the bank industry has a well-established oligopoly, where the 4 major banks have around 70% of the market share together. This oligopoly, along with the high switching-cost in the bank industry, gives these 4 banks a good pricing advantage.

The bank industry in Brazil is also conservatively regulated and highly lucrative, with spreads north of 10%. These two factors reduce considerably the risk for small investors in these banks.

Santander Brasil has around $200 Billion in assets and 2,000 branches. While it still does not have the profitability shown by Banco do Brasil, Itau Unibanco and Bradesco; Santander’s forecast is to grow its credit portfolio faster than the competition in the next years and reach that level of profitability. Because that profitability is currently not built into the stock price, if they really deliver what they are promissing, the stock will adjust considerably in the next years. That has proven to be hard to achieve in the recent years though.

Easy Brazil Investing Rating

Santander benefits from the banking industry fundamentals in Brazil that is very favorable with high switching-cost, oligopoly, conservative regulation and high spreads.

These factors along with the exposure to a fast-growing market, gives Santander a solid investment case which receives the 4 stars EBI Rating. In the banking industry, Itau Unibanco and Bradesco still has a better rating due to their higher profitability and larger scale.

Banco Santander Brasil S.A.

ADR Ticker BSBR
Bovespa Ticker SANB11, SANB3, SANB4
Investor Relations Website http://www.ri.santander.com.br/Default.aspx
Industry* Banks, Insurance
EBI Rating 4-star